US Stock Market Falls as Inflation Rises

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Facts

• The US Bureau of Labor Statistics (BLS) revealed Wednesday that inflation jumped from 3.2% year-over-year in February to 3.5% in March. Meanwhile, 12-month core inflation, which excludes volatile food and energy prices, was 3.8%.¹
• Following the report, which shows gasoline and housing accounted for half the price hike, the Dow Jones stock market index dropped by over 500 points or 1.3%. The S&P 500 and Nasdaq each fell 1%.²
• Stocks of tech companies Microsoft, Amazon, and Apple all dropped as did Bank of America, Wells Fargo, and JPMorgan Chase. 10-year Treasury yields, which correlate to mortgage and loan rates, rose to 4.5%.³
• In light of the reports, analysts assume the Federal Reserve (Fed) won't be cutting its benchmark interest rates at its next meeting in June. The rates, currently sitting between 5.25% and 5.5%, are aimed at bringing the nation's inflation rate down to the 2% target.⁴
• This follows JPMorgan CEO Jamie Dimon's letter to investors released Monday. In it, he claimed that the Fed rates could drop to as low as 2% or climb to as high as 8% in the coming years, citing global conflicts as potential reasons for continued economic struggles.⁵
• Dimon also believes that the chances of an economic soft landing are 'a lot lower' than the current 70-80% given by current estimates.⁶
• Dimon also believes that the chances of an economic soft landing are 'a lot lower' than the current 70-80% given by current estimates.⁷

Sources: ¹NBC, ²Investor's Business Daily, ³CNN, ⁴dailymail.co.uk, ⁵JPMorgan Chase & Co., ⁶FOX News and ⁷wsj.com.

Narratives

• Republican narrative, as provided by National Review. While the president can't control the whole economy, his policies on cars have been one of the leading causes of this inflationary crisis. Car insurance and repairs, which are up 22% and 12%, respectively, are due to Biden's push for electric vehicles. As gas prices soar and the White House pushes its electric vehicle agenda, Americans have been forced by the federal government to pay exorbitant amounts of money. The Biden administration must own this.
• Democratic narrative, as provided by New York Times. America's economic debate has unfortunately been pushed into a partisan one based on perception rather than reality. Despite inflation cascading down from its post-COVID peak and both employment and wages increasing, Republican politicians have defaulted to toxic rhetoric to stain the Biden presidency ahead of his re-election bid. Today's headlines should be about Democrats containing inflation while also forgiving student loans and expanding healthcare.

Predictions